Does Amazon Help or Hurt The Economy?

It often feels like the world we’re living in is an Amazon world. It’s like we’ve entered a parallel universe where Jeff Bezos is the force that makes the world go round. If you’re a retailer or an entrepreneur, you’ll know what I’m talking about.

There is no doubt that Amazon is growing fast. Founded in 1997, the value of the company has grown immensely ever since. And just to put their growth in perspective, here is an example – an investment of just $100 then is worth a six-figure amount now.

But with growth like that, comes great responsibility and opportunity for… well, for even bigger growth. What do you do when you become a leader in one field? You become the leader of another, duh.

Amazon is now trying to expand and step in the brick-and-mortar business. Many retailers worry that their stores will close down because of a huge player like Amazon. And many more struggle to sell on their marketplace.

Being that immense force that they are, all questions fade compared to that one loud, throbbing sound of the biggest question there is: Is Amazon really good for the economy?

Amazon’s brick-and-mortar dreams

Photo by Mike Petrucci on Unsplash

The Future Of Commerce Is Multichannel

It always seems like Amazon is a few steps ahead of every other retailer when it comes to strategy. The company realized very early on that the future of commerce will be neither black nor white when it comes to shoppers choosing online or offline. Before any marketer dared to open the subject about omnichannel, multichannel and going both ways, Amazon was already leading the way.

Four years ago, in 2015, they opened doors to their very first physical bookstore called Amazon Books and ever since they have expanded all across the US.

After their physical bookstore opened, Amazon decided to try it out in the grocery business and they did it with a loud bang. Innovation isn’t a strong enough word to describe Amazon’s idea of a physical store with no checkouts. Having purchases automatically billed to customers’ accounts, Amazon Go started paving the road to new brick-and-mortar stores.

Creating Amazon Go & Acquiring Whole Foods

They opened in Seattle and as good and innovative as the idea was, it left other offline retailers with a hole in their business model. As many more Amazon Go stores surface, everybody wonders whether this will be the end of shopping as we know it.

And while Bezos and team experiment with Amazon Go, they made a strategic move to acquire Whole Foods. The deal was accounted for $13.4 billion and it allowed Amazon to own 460 stores in the US, Canada, and Britain.

This gave them an incredible head start in the brick-and-mortar competition by providing their already strong hand with a trusted brand and an established network of stores. And they don’t stop here. While Whole Foods was famous for its locally adapted strategies, Amazon is way more egocentric. They’ve undertaken a standardized strategy and don’t bow down to local rules.

Realizing that the future is multichannel, they are going strong in both directions – physical and online. If Amazon, and every other retailer for that matter, stay just online, this would significantly restrain and make them miss out on all the ways a customer wants to shop. So, entering the world of brick-and-mortar ensures Bezos’ empire has a cut of yet another revenue stream.

And if Amazon’s ambitions stopped somewhere around here, perhaps it could be said that they are indefinitely helping the economy. But their dreams don’t stop here.

Taking over their own marketplace

Selling on Amazon’s marketplace comes with many perks. The best one is what any marketplace really has to offer – taking care of the responsibility for the ordered goods’ delivery and unburdening online retailers from this splitting headache.

So, their genius logistics infrastructure doesn’t just ensure they ship to people across the whole globe. It also helps small businesses in a big way. What it also helps small web merchants with is an expanded customer reach. If you’re not going strong on Google or any other search engines, listing your products on Amazon is a quick save.

Amazon’s Own Label

However, being the overlord on Amazon Marketplace gives Amazon all the rights to promote whatever they want. And this is where AmazonBasics comes into play. AmazonBasics is Amazon’s own brand which really does cover only the basics.

According to Seller’s Choice, over the years it has expanded to more than 2000 products alone and counting. Having their own label doesn’t really harm the web merchants who list their products on their Marketplace.

Nevertheless, what somehow gets in the way of online merchants who sell on the Amazon Marketplace is that their products are not the first to appear in Amazon search. Even if they’ve done their job right, even if they’ve complied to all Amazon listings’ rules, if AmazonBasics offers it, then it’s what comes up first. By doing this, they cut their own sellers’ revenue.

“Fair enough, it’s their own Marketplace”, that’s what everybody says. But is it really fair, though?

A marketplace is supposed to provide equal rights to everybody. It is supposed to challenge web merchants to take care of their product listings in order to sell more. If there is someone who pulls the strings, it shouldn’t be taking advantage of the search results. AmazonBasics should complete as all other sellers do.

The company’s ambition to fill every home with Amazon goods does not justify this action.

Is creating jobs enough to do the trick?

Being accused of getting too big and too powerful is bound for action on any company’s part. For all the businesses Amazon overpowers and overshadows, they are creating at least two new job positions.

In a recent report, they said that 900 000 jobs were created outside of their own company only on account of Amazon Marketplace. And apart from this, Amazon gives small businesses and entrepreneurs a fighting chance to make some money off of selling their goods.

It is also said that in 2017 Amazon had 566 000 employees across the world and by the end of 2018, this number has grown to 575 000. Which is admirable considering the many jobs it has taken away from retailers who were forced to shut down their stores just to cut back on costs.

Second Headquarters’ Opportunities

Crystal City, Arlington, VA

Right now, the company is building its second headquarters, which is allegedly reported to bring in over 50 000 jobs. In addition to creating so many job positions for people inCrystal City, Arlington, Virginia, which is where their second headquarters will be, Amazon is also investing an estimated $5 billion in the city.

I would call this throwing sand in people’s eyes because whatever they invest in won’t bring back millions of lost jobs. One could argue that all the jobs retailers lost in this “big player-small player” fight are not as significant as what Amazon plans for next, considering that they thrive to change the world. And they can do it. They have all the resources to build something that really matters.

At the end of last year, they announced that the company will raise its minimum wage to $15 per hour, which is a much higher salary than what the federal minimum wage is in the States ($7.25 per hour).

But good acts like this one don’t stop people from thinking that Amazon is getting too big for its own good. And since the question here is whether they’re actually good for the economy, look at it like this:

Their growth gives them an actual chance to cut monopoly out of people’s lives but instead what do they do? They turn into one.

Investing in small entrepreneurs

While they take down the small players by forcing them to shut down their own brick-and-mortar stores, Amazon tries to be the good guys until the end. So all the jobs they create won’t be as valuable as their investment in small entrepreneurs.

This is what makes it so difficult to answer a question like “Does Amazon help or hurt the economy?”. Because their actions are controversial and so are the consequences of their actions.

As of 2017, Amazon had $737 million worth of equity investments in public and private companies. They are a huge investor and they put their faith in small businesses by lending a hand.

Is Amazon good or bad for the economy?

Photo by Markus Spiske on Unsplash

A question like this one is not an easy question to answer. Despite all efforts to help and invest, there is no doubt that Amazon hurts millions of businesses across the globe.

In the short term, you could say that yes, Amazon is good for the economy. They are making retail much more efficient by innovating and by creating a bigger demand. By doing this, they help retailers bring in more customers. They are also creating many jobs in cities that need them, which definitely is a thing of itself.

But in the long term, definitely not, Amazon is not good for the economy. Big companies like Amazon lead to a greater concentration of wealth. Yes, they make retail more efficient but they also force retailers to go out of business. There is a simple explanation here. The wealthy spend a much smaller percentage of their money compared to the middle class. Which means that less and less money flows back into the economy when wealth is being held by big companies like Amazon.

And there you have it. The answer to a question so scary like this one.

Can We Change Things?

Is there anything we can do? Perhaps not. Perhaps we can just sit back and witness the building of a retail empire.

But fair competition laws exist just for this reason – to stop companies like Amazon from cutting back retailers’ revenue.

Senator Elizabeth Warren is just one voice in this void. If you’re not aware, she recently proposed to break up big tech companies like Amazon because she thinks that they “shouldn’t be able to operate an ecommerce platform and at the same time sell their own products on that platform with all the competitive advantages inherent in owning the platform”.

This is one of the first public debates about fair competition in the government where Amazon is mentioned as an example. And her voice probably will not stand alone. Many will support her, many retailers like yourself who wish to sell on the same level playing field as the big players.

I urge you to get involved. Hopefully, an article like this one will open your eyes to the new reality that Amazon represents for small merchants across the globe.